The controller of Shirt Corporation believes that the company’s yearly allowance for doubtful accounts should be 2% of net credit sales. The president of Shirt Corporation, nervous that the stockholders might expect the company to sustain its 10% growth rate, suggests that the controller increase the allowance for doubtful accounts to 4%. The president thinks that the lower net income, which reflects a 6% growth rate, will be a more sustainable rate for Shirt Corporation.

Instructions

(a) Who are the stakeholders in this case?

(b) Does the president's request pose an ethical dilemma for the controller?

(c) Should the controller be concerned with Shirt Corporation's growth rate in estimating the allowance? Explain your answer.